Economy: The Crisis Continues

The continuing political instability in Pakistan means that the economy is lurching from crisis to crisis. Only in the last two weeks, the government has withdrawn over $800 million from the coffers of the central bank, leaving only $8.7 billion in foreign currency reserves. And now Pakistan is seeking bridging loans from friendly Muslim countries like Saudi Arabia, hoping that loans amounting to about $3.5 billion will help rein in its huge fiscal and trade deficits. Saudi Arabia had allowed Pakistan to defer oil payments even in 1998 after the US imposed severe sanctions when Pakistan went nuclear.

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Oil prices, currently touching $130 a barrel, have inflated the oil import bill to over 40 per cent in the last ten months, the current account deficit has surged to about 7.5 per cent of the GDP, while the fiscal deficit has spiraled to about 9 per cent of the GDP. The Karachi Stock Exchange, considered to be one of the most spirited indexes in recent years, has been consistently in the negative. And although remittances from non-resident Pakistanis continue, the crisis is getting aggravated by the consistent flight of capital. Entrepreneurs say the situation cannot ease until the political crisis is resolved, when the government assures foreign capital that their money is safe.

A direct manifestation of the economic crisis has been on the energy sector, with cities experiencing hours and hours of electricity cuts.